Carmaker bailout is best move for nation

December 21, 2008|By David Greising

"Save Our America, Buy American," reads a 10-foot-by-30-foot banner that Jeff Hobson, co-owner of the Gates Chevrolet Buick Pontiac GMC, slung across the entrance to one of the largest dealerships in Martinsville, Ind.

The pitch to patriotism is anything but subtle. But in places such as Martinsville, trouble in the car industry is like a sledge hammer to the heart.

Some 75 percent of Hobson's customers are employed by the car plants and parts suppliers in the Martinsville area. Thousands of car jobs have gone to Tennessee, Alabama, South Carolina and other southern states since Honda opened the first Japanese transplant in 1982, but Martinsville is still just a few miles from the geographic center of the U.S. auto industry.

"It's not just our community here, it's all around us," said Hobson.

Until President Bush on Friday promised $17.4 billion in emergency loans for the car companies, though, Martinsville was feeling a bit left out.

When the mid-September failure of Lehman Brothers brought financial markets to a halt, the government speedily rolled out a complex bailout package, introduced unprecedented monetary intervention and helped orchestrate mergers and rescues of failed financial firms.

Yet when the auto industry feared collapse, with a plunge in sales no less severe in its own way than the credit crisis that had swept through the financial markets, the government's SWAT-style rescue approach suddenly ground to a halt.

Congress wrangled and ultimately stood still. President Bush stepped in, in a rare reverse of course, because, ultimately, the Detroit car companies can and should be saved.

Detroit has been far from perfect. Carmakers have fought against efficiency standards and failed to anticipate today's green-conscious, cost-conscious customer. They waited too long to cut bloated labor costs. They lost the edge on car design.

But Detroit is an essential industry, still "the backbone of American industry," in President-elect Barack Obama's words.

The aid plan prudently insists that the carmakers must cut costs and implement sweeping change by March 31. Failing that, the new Obama administration could ask for the money back and withhold any new support.

Labor must add to the concessions it already has made. Workers will have to give up more in health and retiree benefits. The jobs bank that paid union members who did no work is, and should be, dead.

General Motors and Chrysler need to revive merger talks. The Detroit Three will have to shut plants, prune failing models, and reduce the ranks of car dealerships. A relatively healthy Ford should find ways to capture market share from its U.S. and transplant competitors alike.

Bankruptcy, once the great boogeyman of the bailout debate, might ultimately be the right prescription for GM or Chrysler. American consumers, who will fly a bankrupt airline, can be persuaded to buy from a bankrupt car builder. And bankruptcy might prove to be the most orderly, least political way to bring about the sacrifices necessary to make Detroit viable.

"A structured bankruptcy might not be so bad. People are getting used to the idea," said Hobson. "If it reduces costs and cuts a lot of fat, it might help to sell cars."

The bailout money is a temporary lifeline. Now, Detroit has to use the money, and whatever means necessary, to fix itself.

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dgreising@tribune.com

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